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1 - 100 Tips for the Survival of Consulting Firms

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Tips for Consulting firms to survive and grow in a recession

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Growing & realising equity value in consulting firms

Important Notice
Equiteq aims to provide owners of consulting firms with the best information and advice to help them make decisions about the growth and potential sale of their firms.The tips included in this document have been prepared on the basis of our experience and observations of good industry practice.They are for you to use in any way you think fit. However, they are of a general nature, cannot be comprehensive and may not be suitable for your particular business or situation.They do not constitute investment advice. We may also have very limited or no information about your particular business and situation and we may not have been formally engaged by you. So, if you act on any of the tips contained in this document, Equiteq should not be held liable for your decision to do so or the way you in which you do so. Accordingly, Equiteq makes no representation or warranty as to the contents of this document and expressly excludes to the maximum extent permitted by law all representations, conditions and warranties which would otherwise arise by operation of law or any other reason Equiteq shall not be liable in contract, tort (including negligence) or otherwise for any liabilities, damages, costs or expenses, loss of profits or revenues or expected cost savings or goodwill or for any other loss whatsoever, regardless of whether they would arise in the ordinary course of events or otherwise or are reasonably foreseeable or are otherwise in contemplation, in connection with this publication save to the extent such liability may not be excluded or limited by law. By accepting a copy of this document you hereby agree to the terms set out above. If you do not agree, please could you destroy this document.

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How to use this guide
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Read this first 2 7 19 29 39 51 63 Introduction and the Equity Growth Wheel Tips 1 to 9 – Sales & Profit Growth Tips 10 to 17 – Market Proposition Tips 18 to 25 – Management Quality Tips 26 to 35 – Consultant Loyalty Tips 36 to 45 – Sales & Marketing Process Tips 46 to 54 – Intellectual Property
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Tip to avoid recessionary profit decline

75 Tips 55 to 61 – Quality of Fee Income 85 Tips 62 to 69 – Client Relationships And if things get really bad! 95 103 Tips 70 to 90 – Tips to avoid going bust Tips 91 to 100 – And if all else fails!

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Will things get much worse for consulting in a recession?

You bet!
If you have not yet experienced a recession while running a consulting business; watch your back, severe downturns bring nasty cash flow surprises that creep up from behind! You may be optimistic by nature, but be prudent and ask yourself “How am I going to survive a two year recession and maintain the wealth I’ve built to-date?” Well help is at hand because we experienced the last two recessions, each leaving us with painful memories and costly lessons. We have pooled all that hard won experience into an easy-to-read guide that hopefully will help YOU not to falter and fail, but to survive and prosper and come out of it stronger than your competitors.
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The guide is organised into sections using our ‘8 levers of Equity Value’ model that many firms already use for growing their business. Each section is prefaced with a brief explanation of the importance of the lever to growth, followed by the tips that you can implement TODAY to help you survive the recession. The first 69 tips are about immunisation against the worst effects of the recession, take note of these and you won’t need the last 31! If it is too late for prevention, cash is running out, and intensive care required, go straight to tips 70-100! Remember that in every cloud there is a silver lining and World Class firms see opportunities in recessions to take market share. Get it wrong and you may have to take refuge as an employee of one of the Big 5, get it right and you could be much stronger in 2010 than you are now, it’s your choice! Read on and good luck…
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The Equity Growth Wheel
A proven model for profit and equity growth in consulting firms We’ve spent over ten years developing this model to help consulting firms to grow, it works and our clients give it rave reviews. Go to www.equiteq.com/ega for more information. The tips that follow are structured in these 8 segments. Each tip is prefaced with a short explanation of the issue, followed by the specific action you can implement today to improve profits and cash flow and help you survive the recession.

Good Luck

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Sales & Profit Growth
Without sales, there is no profit and without profit there is no cash to pay salaries! This lever is about turning sales growth into profit and cash in order to fund our future and survive tough times. It’s also the main equity value driver in your firm. However good we are, without profit growth your firm has very little value in the eyes of shareholders. Shrinking profits could put back your shareholder and retirement plans by 4-5 years. Running out of cash could put you into liquidation and take away your biggest financial asset. THIS IS IMPORTANT STUFF!
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Most consulting firms are woefully inadequate at measuring and understanding sales, profits, costs, cash and the levers you can pull to improve performance. Many of these next tips are about measurement, focus, understanding and drive. START HERE!
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Sales & Profit Growth

TIP 1
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Focus on sales performance

You can’t measure some things too much and sales is one of them. Without client sales you don’t have a business and you certainly don’t have any value.

Tip 1 Measure sales by market sector, by service line, by
client, by project, by consultant, by team. Measure it weekly and put charts in key places in your office. Focus on sales performance in all management meetings and reward/ recognise performance. Make sales growth the over-riding mantra for ALL staff. Do it NOW and then watch sales grow!

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Sales & Profit Growth

TIP 2

Drive EBIT to 20% now

Investors and buyers get a return based on future profit growth. Without this you have no equity value. Without profit you will run out of cash quickly.

Tip 2 Analyse the last 2 years P&L statement in detail and
identify EBIT (earnings or profit before interest and tax). Is it growing? Is it greater than 20% - the industry benchmark? Identify the levers that would increase it to 20% like fee rates, utilisation, salaries, associate costs, overheads. Measure them monthly as a team and aim to get to 20% as fast as possible. 20% provides a buffer that will insulate you against unexpected sales losses in a recession. See other tips for how!!

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Sales & Profit Growth

TIP 3
10
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Run weekly sales meetings

Growth consistency is crucial for building equity value. In a recession, maintaining value should be the priority. Just don’t let sales and profits REDUCE. Easier said than done but here’s a tip to help.

Tip 3 Don’t get complacent about dropping behind the
revenue plan by month or by quarter thinking you will catch up later in the year – you won’t! In a declining market it is almost impossible to ‘catch up’. Run weekly sales and resource meetings to ensure that every sales opportunity is taken and all available staff are billing.

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Sales & Profit Growth

TIP 4

Drive Gross Margin to >50%

Gross Margin is the difference between the fees we charge clients and the direct consulting delivery cost; a huge focus of investors and critical to long-term growth and sustainability. It should be >50% at the individual consultant and project level.

Tip 4 Make sure you measure it! You can afford to drop
up to 10% in under-utilised consultants at the company level so measure this also.This leaves 20% for overheads and 20% for EBIT – and a margin for error in times of trouble! Drive it relentlessly to >50%.

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Sales & Profit Growth

TIP 5
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Reduce overheads to improve EBIT
Time to focus on COST. Irrespective of what Gross Margin you make you won’t generate cash and survive the recession without making a net margin.The difference between GM and EBIT is ‘overhead’.

Tip 5 Analyse your overhead costs for the past 2 years
and critically challenge them. Focus on costs like offices, expenses, admin that don’t grow sales. DON’T CUT sales and marketing costs – you will need these to keep growing or maintaining sales. Develop a plan to reduce the rest in order to maintain or improve EBIT to 20%.

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Sales & Profit Growth

TIP 6

Increase your fee rates!

Are you under-selling your services? The biggest and fastest way to grow profit and cash flow is to increase your rates. “What, in a recession?” we hear you say! “YES” is the reply.

Tip 6 First understand where you sit compared to the
market. Poorly performing firms often under-sell on price. Most of this is in YOUR head, not the client and has to do with how you express the value of your proposition and the benefits to the client.Target rate increases for new clients immediately and see Market Proposition tips to boost your selling confidence!
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Sales & Profit Growth

TIP 7
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Get tough on Consultant utilisation
Often the key difference between profit and loss in a consulting firm. Small changes in utilisation create large changes in profit and cash generation.

Tip 7 Measure it by consultant, manager, project and
client. Measure it weekly. Directly reward all consultants on their utilisation. Many firms think this is wrong but it is not, particularly when times are tough. Get tougher on utilising the ‘bench’ before you recruit contractors. Look for ways of replacing contractors with good staff – but not at the expense of client relationships. Relentlessly drive utilisation to profitable levels.

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Sales & Profit Growth

TIP 8

Drive up the size of engagements
Leverage is the way the big firms use a large team of junior consultants to improve margins. It works, but only when either you have a big brand or you have valuable intellectual property (IP) that facilitates the use of juniors.

Tip 8 Start to understand the relationship between size
of client engagement and client profitability.There is a direct relationship. Measure average size of engagement and drive it higher in every meeting, conversation and proposal. See the IP tips to build leverage.
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Sales & Profit Growth

TIP 9
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Get tough with Contract Consultants
Associates or contractors earn more per day than staff because they take the risk on utilisation. In a recession that risk needs to be shared more equally.

Tip 9 Re-negotiate associate day-rates to less than 50%
of the client fee rate in the context of greater market uncertainty.Take the opportunity to use the recession to change the associate relationship with the firm and drive higher gross margins. Express the day-rate contract as a percentage of the client rate to encourage both parties to drive up client rates and share risk more fairly.

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NOTES

Sales & Profit Growth

Notes

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Market Proposition
Our market proposition is the service that we offer to clients that should provide more value to the client than they pay for the service. If our service is both high value relative to cost and unique, clients will rush to buy it. If our service is perceived to be of low value relative to cost and the same as other providers then it will be difficult and costly to sell. This lever is normally all about creating a UNIQUE VALUE PROPOSITION that ‘WOWs’ our clients. However in a recession ‘VALUE’ takes on a different meaning in the eyes of the client. It’s easy. Will you cost me more this year, or even this quarter, than you will save? If so, you are history! If not you can help me survive to fight another day. So how do we build high value propositions in a recession?

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T I P 10
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Market Proposition

Guarantee short-term benefits
Most consultants and firms talk about the ‘features’ of their service. ‘Smart methods’ are features, cost savings are benefits. Clients want to hear about benefits and they want to know that the benefits you bring will save them more than you cost.

Tip 10 In a recession a client’s view of benefits shortens
to one year, not 5 years or even 3, as they might not have a job then, but THIS year. By the way, they would also like you to guarantee those benefits by making your fees contingent upon success. Build a contingent value proposition with a maximum one year ROI and you will prosper.

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T I P 11

Market Proposition

Don’t compete on price

In a recession, if your service is the same as others then only price will determine the selection outcome. Strong client relationships erode quickly in the face of a cheaper supplier!

Tip 11 Stack the cards in your favour by being unique
in a way that clients value. It could be that you are the only supplier that will guarantee results on a ‘no result-no fee’ basis. It could be that you own IP that nobody else can access. It could be that you have referrals second to none. Whatever it is, make your offer unique and don’t compete on price.

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T I P 12
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Market Proposition

Become an expert

I’m a client and my business is worried about how we will survive the recession. Who will I trust to help me? A smart consultant with slick methods or an expert who knows my unique problems and has experience of my industry sector? ‘Grey hair’ consulting does well in a recession!

Tip 12 Focus on sales in the clients or market sector
where you have the greatest experience and the most referrals. Clients, like you, want to de-risk their decisions in a recession. Make sure you are seen as ‘experts’ in one or more particular clients or sectors and focus your selling efforts there.

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T I P 13

Market Proposition

Become a thought leader

You want to make an impact with existing clients and new prospects in a key market sector where you have great experience.You might be good but you are the sector’s best kept secret! What better way than to be seen presenting or writing about solving the key industry issues of that sector, particularly if that links to your service offering.

Tip 13 Identify your top sector’s hot topic for survival and
write either a thought leadership piece or a presentation for a seminar/workshop that will position you as the person to help resolve those issues. Execute well and wait for the calls.
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T I P 14
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Market Proposition

Build on current client successes
Does your proposition help you grow client revenues, once you have got over the doorstep with the initial offer? Try and think about ‘step and repeat’.

Tip 14 If you have delivered a return on consulting
investment of 200% in the last year in this department or this site or this process, what about repeating the same activity across the entire client? Review your most recent client successes and package an offer to take the same proposition but at a 250% ROI (because you’ve fine-tuned the approach now) to the entire global business. Guarantee results and you can’t lose.

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T I P 15

Market Proposition

Develop a high value, contingent offer
Imagine selling £10 notes for £5 in the street.You wouldn’t have to be a world class sales person to attract more customers than you can handle! Now try selling £5 notes for £10 and see how good your sales skills need to be to sell just one! YOUR propositions need to feel like £10 worth of value for a cost of only £5.

Tip 15 Develop a £10 for £5 compelling value proposition
tomorrow, costing you little to deliver, then let clients try it for free. Get their agreement up front that if you deliver, then after a short measurable period of success you will be paid your full fee.Watch them flock to your door.
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T I P 16
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Market Proposition

Find the ‘white space’ and exploit it
Someone once said that strategy was about finding the ‘white space’ in the crowd. Would you rather always find yourself competing against the ‘usual suspects’ or pave your own way to success?

Tip 16 Read the latest MCA report; see who’s recruiting
what skills on Top Consultant; do some research on what clients need NOW to help them survive and engineer some ‘white space’.That’s the space that clients need and on which competitors are not focussing.You could find yourself owning that space and until someone else spots it – when its time to find the next space! – demand and profits will be good.

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T I P 17

Market Proposition

Don’t wait for the tender, write it!
Ask any consulting firm why they lost the last bid and they will tell you that they lost it on price. Most didn’t but don’t know it! Most tenders are won by the firms that stack the cards in their favour by writing the bid or influencing the client before the tender process even starts.

Tip 17 Rather than wait for the bid document to arrive,
target clients with a compelling proposition in an area where you have a ‘right to win’ i.e. you have experience and referrals. Even if the prospect has to tender the work, chances are only one firm will meet the spec – YOURS!

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Management Quality
The leadership of a consulting firm is crucial if the company is going to survive, grow and prosper. If you have been managing OK so far but in your heart believe that the management breadth and depth of skills don’t exist at Board level, now is the time to do something about it. Surviving a recession takes experience if it is not to be painful. Being one day away from personal bankruptcy is not fun! This lever is about the things you can do NOW to make life easier for you and perhaps share the load of navigating your firm through tough times ahead. Investors say they don’t invest in firms, they invest in management teams. Make sure your management team is up to the test!
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T I P 18
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Management Quality

Get advice and listen to others
Have you gained your position as MD of your business because you were the founder or your sales skills are/were the best in the firm? The answer to this is usually yes and usually the full skills required to grow the firm in tough times, e.g. financial skills, aren’t present.

Tip 18 Go and find a mentor who is/was a business
owner and has been through a recession before and befriend them! This could be a formal relationship through a non-exec type of role or just informal chats over a glass of wine, but find someone to talk to outside the firm who can help you with the decisions required in the times ahead.

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T I P 19

Management Quality

Recruit a Finance Director

The best decision you might ever take in your firm is to recruit a capable Finance Director. Most owner/MD’s have got there because of their Business Development skills and attention to detail, particularly financial detail, is sadly not usually a strength!

Tip 19 Go and recruit an FD if you don’t already have
one and if you do, make sure they are up to the job. Depending on your size it needn’t be a full-time role but all firms above £1m sales should have a full or part-time FD on the Board – it will be the best money you spend in the next 2 years.

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T I P 20
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Management Quality

Lead from the front and take charge
Don’t make the mistake of involving all staff in developing company strategy. Some tasks must be clearly the responsibility of the leadership team or the firm could look ‘rudderless’. Particularly during difficult times like a recession you need to lead from the front.

Tip 20 Make it very clear to all that you are in charge,
in control and that the firm will not only survive the recession but come out the other end stronger and poised for rapid growth. Even bright, egotistical consultants need direction and security!

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T I P 21

Management Quality

Don’t leave the future to chance, plan it!
Ok, now it’s rare that we see good business planning in consulting firms – something about cobblers and shoes perhaps! During a recession everything becomes a lot more sensitive and demands good planning/control.

Tip 21 Build a planning process that starts with financials
and links to other drivers of performance like utilisation, fee rates, resource management (recruiting/contracting etc) and marketing/sales activity. Don’t go and buy an ERP system (not the right time) but do make sure that your spreadsheets and web services cover all the above so that you have real-time information at your fingertips.

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T I P 22
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Management Quality

Re-structure and share the load
Do you work ‘in’ the business or ‘on’ the business? Most consulting firm leaders lean too far towards the former.To navigate a recession you will need to change the balance. Here’s a tip to do that very quickly.

Tip 22 Break the firm up into several ‘Business Units’ –
it could be by client, by sector, by service line. Appoint your best people as BU Managers (yes, you’ve spotted the abbreviation!) Give each P&L responsibility to gross margin level (GM) and stand back. Measure and reward them on GM. You will suddenly find you have a lot more time to manage the firm!

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T I P 23

Management Quality

It’s good to talk!

It is always said that you can’t over-communicate to your staff and this is particularly the case during a recession. Everyone will be worried about their jobs and you don’t want rumours of imminent extinction of the firm to distract consultants from serving clients at a critical time.

Tip 23 Spend your new found time (see tip 22!) talking
to staff. Keep them up to date with client wins, be open about sales and finances – good and bad. Explain how they can help – chase sales, watch costs etc. Above all keep upbeat and positive. They will take your lead….

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Management Quality

Appoint someone senior to drive resourcing
Firms that employ a senior person to manage company-level utilisation do better financially than those who leave it to the ‘internal market’, sometimes by a factor of 10% extra profit! That 10% can make the difference between profit and loss in a recession.

Tip 24 Make sure you task a senior person with the
clout to make resourcing decisions, particularly when times are tough. Measure them on company-level utilisation and expect to have to referee sometimes!

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T I P 25

Management Quality

Keep critical information up-to-date
There is nothing worse than ‘rear-view mirror’ accounting. Knowing that your utilisation was 50% six weeks ago is of no use to anyone but an accountant!

Tip 25 Whatever systems you have in place make sure
that any KPI’s you need to run the firm are up-to-date within days of needing the information. For sales and resourcing data, that means real-time and for financial data, no older than a week. Fix it now and fix it quick.You will need it very soon.
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Consultant Loyalty
What is a consulting firm without consultants?! This lever is about how we recruit, train, develop, motivate and reward our people. Despite ‘people being the greatest asset’ of consulting firms, most firms score poorly in this lever. During a recession we should expect there to be some staff losses, either proactively instigated by the firm or through fear/uncertainty. Making sure that you are in control of the situation is crucial during turbulent times. You should be the one who decides who stays and who should go if it is necessary.

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Consultant Loyalty

Keep recruiting quality consultants
Under normal circumstances, making sure you recruit well from known sources is critical to the success of a growing consulting firm. Recruiting is very expensive if you get it wrong and good value if you get it right.

Tip 26 Maintain your recruitment stance during the
recession.You want your staff, agencies and prospective recruits to see you as a successfully growing firm during difficult times.You might slow down recruitment but if excellent candidates turn up, it still might make sense to recruit, even if it is only to replace some staff you have lost.

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T I P 27

Consultant Loyalty

Replace staff losses with contractors
A well-managed pool of knownquality contract or ‘associate’ consultants is critical for all consulting firms but during a recession it is even more important.

Tip 27 You may be forced to lose some of your
permanent staff during a recession and may indeed decide to alter the balance in favour of more contractors to minimise risk.Whilst this minimises cost exposure it could increase delivery quality risk. Make sure you don’t drop your standards in deciding to use more contractors. Expect to invest more time in this area to balance cost/quality risk. See Tip 9 to reduce contractor costs.

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T I P 28
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Consultant Loyalty

Reduce salaries as a % of total compensation
A well-designed bonus scheme can make the difference between a mediocre consulting firm and an industry leader. They are that important!

Tip 28 It is time to put more personal income at risk
during a recession so that most of your senior staff share in the problem and are motivated to improve the situation. Start with your direct reports and increase the ratio of bonus to fixed salary. Link the new bonus to company-level profits to encourage team behaviour. Go down the structure as far as managing consultant level. Protect the income of more junior staff to maintain loyalty.

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T I P 29

Consultant Loyalty

Trade equity for salary and loyalty
The best consulting firms use equity through shares and share options to motivate the senior team. If used intelligently, share schemes can be a large driver of growth in consulting firms.

Tip 29 During a recession you might have to ask your
most senior staff to take significant cuts in salary to protect the firm. Rather than lose staff who contribute to profit growth, consider trading income for equity during a recession. It may help you survive as well as lock-in your best leaders and share the load in difficult times.

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T I P 30
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Consultant Loyalty

Cut staff costs before you lose them
High staff turnover is expensive, disruptive and a sign of poor leadership. During a recession however, some staff losses might be necessary to survive.

Tip 30 Make sure it is YOU who decides who leaves
the firm, not individual staff. If you have already acted to avoid losses but still need to reduce staff costs, act decisively and cut your weakest consultants BEFORE the best ones decide to walk through fear of redundancy. Recessions can be good for strengthening the team but only if you take control and act quickly.

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T I P 31

Consultant Loyalty

Continue to reward good staff
Consultants at all levels need clear career paths as much as any other employee. Recessions are not an excuse to ditch career progression.

Tip 31 Make sure you continue to promote staff who
are ready and deserving of progression during difficult times. An employee who is held back unfairly won’t perform well and will start looking for another firm to recognise his/her new capability. Communicate to all that careers are not put on hold just because of the recession. See Tips 28 to 30 to mitigate the costs of this policy.

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Consultant Loyalty

Keep your staff busy to boost morale
Getting the work/life balance right is one of the most difficult challenges in the consulting world. It is too easy to ‘burn-out’ consultants by not paying attention to personal as well as business needs.

Tip 32 Everyone’s attitude to work/life balance changes
sub-consciously during a recession. Keeping a job and paying the mortgage take precedence. Keeping consultants fully occupied, whether it is client billing or contributing to sales is the key to morale and loyalty during a recession. Managing ‘downtime’ becomes an even more important priority for management.

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T I P 33

Consultant Loyalty

Time for on-the-job training
It is perhaps obvious that training to improve the skills of consultants is a key part of the growing consulting firm’s agenda for success. During a recession we have to think beyond external training courses to internal skill development.

Tip 33 Every current client assignment and every internal
process – particularly sales and marketing, is an opportunity for high quality, low cost training during a recession. Assign under-utilised consultants to existing clients and sales pursuits to both build skills as well as provide more resources to improve client retention and sales.

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Consultant Loyalty

Use downtime to grow your skills matrix
The best consulting firms have a welldefined process for managing the skills and career development of all consultants. During a recession you can’t afford to put this on hold.

Tip 34 Time to make the most of cross-skilling.
The best Personal Development Processes (PDP) include a skills matrix to manage the inventory of available skills in the firm.Task each consultant to use their downtime to add more skills in priority order. Use consultants on current engagements to provide hands-on training for those in learning.Task and reward those consultants with clients to find paid work for those in training on client sites.

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T I P 35

Consultant Loyalty

Use monthly peer reviews to maintain a sense of urgency
Firms with an advanced PDP use annual Peer Reviews to assess the performance of colleagues. In a recession this can be increased to monthly peer reviews.

Tip 35 Use peer pressure and a sense of urgency to
drive sales performance during a recession. If your senior staff are already used to public peer reviews, run them monthly and focus the attention on sales performance. Keep the critique positive and lever the sales skills of the entire team to maximise sales opportunities.
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Sales & Marketing Process
No matter how good we are, there is no point if prospects are not aware of us or we are not able to persuade them of our value.This lever is about the lifeblood of our company – how we attract clients to us – marketing - and how we persuade them to do business with us – sales. Most consulting firms are poor at S&M. We focus on this process because it is crucial to sustained growth in a consulting firm. Small improvements in this lever can yield a high upside in growth and in a recession it could make the difference between survival and personal bankruptcy.

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Sales & Marketing Process

Make the most of past/current relationships
Do you wait for serendipity to throw some sales leads your way or do you proactively chase groups of qualified prospects where you have a ‘right to win’ with a wellcoordinated sales campaign? Now is the time to do the latter.

Tip 36 Your past clients already know that you are good
and you deliver. Contact all of them by phone or email now with a ‘new idea’ that will benefit them during the recession. This should be a new sales proposition that produces a return on investment ‘this year’.You will get meetings because of past goodwill and if your new idea is strong, some of those meetings should create new sales.

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T I P 37

Sales & Marketing Process

Target your marketing to take market share
Most firms spend far too little on lead generation during good times and cut this budget even more during a recession. Well-targeted marketing should be your best investment and during bad times it’s time to take market share.

Tip 37 Be innovative. Pick the market sector where
you have most experience.Work out the biggest issue that prospects in that sector will face in the recession.Write a thought leadership piece including some solutions to the issue. Email a teaser to your prospect list; bring them to your web-site to download the paper. Follow-up with those that do. Sales should follow.

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Sales & Marketing Process

Ask and ask again for referrals
Most people understand the idea of asking current clients for referrals but many either don’t do it or do it at the wrong time in the relationship. So long as you are not planning to work with the biggest competitor to your client, clients are usually happy to refer.

Tip 38 Get all your consultants together in the next
company meeting and run a session identifying who you can ask for referrals and which prospects you would like ideally to get referred to. Aim for at least one meeting from a referral per consultant in the next month.

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T I P 39

Sales & Marketing Process

Build your 3rd party referral network
Whilst referrals from existing contacts must be worked first you should also be building a new network of affiliates motivated to send work your way. As our industry friend John Niland of Success 121 says “Time to use other people’s leads”!

Tip 39 In your next company meeting get all consultants
to brainstorm other service providers that work for the same type of clients that you serve. Create a list and assign responsibilities to contact these providers with the offer of cross-selling each other’s services.You might even include a financial incentive. Both they and you will benefit from access to each other’s service and the referrals will get you over the doorstep. A real ‘win-win’!

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Sales & Marketing Process

Rigorously follow-up old leads
These days there is no excuse not to track sales leads in a system that gives you instant real-time visibility of the pipeline. Systems like Salesforce.com and ACT are inexpensive and easy to use and managing supply/demand is critical to profits and cash flow.

Tip 40 List all of the leads that you have had contact
with in the past 24 months. Prioritise the leads and assign responsibility to your senior team to follow-up. Email or phone them all in the next month. It’s surprising just how many will respond positively – they just needed asking!

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T I P 41

Sales & Marketing Process

Ask current/past clients for testimonials
Knowing why you win business is just as important as knowing why you lose. Most of us just don’t ask but if we did we would achieve new insight into winning new business.

Tip 41 Email or phone all of your main sponsors in
current and past clients and ask them why they chose you for the job. Most will like being asked. Capture this information and produce a list of quotations to use in your prospecting. Ask permission to use the quotes – most will say yes or will agree with small changes. Put them on your web-site and use them in all sales calls.

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Sales & Marketing Process

Use sales pipeline data to drive sales activity
If adequately described and measured, your sales pipeline data is the best predictor of future demand. Forecasting future sales accurately is possible in consulting and can make a huge difference to profits.

Tip 42 Categorise all your prospects and assign
probabilities of conversion to booked work over the next 3 months. Use this ‘discounted pipeline’ to help drive marketing and sales activities to drive up sales.Track your forecast accuracy and fine-tune conversion ratios to improve predictability.

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Sales & Marketing Process

Use sales pipeline data to drive layoffs
Delivering healthy profits depends on your ability to accurately forecast sales revenue and match consultant supply to sales demand. In a recession you want as much notice of a sales downturn as possible to reduce costs in line with sales.

Tip 43 Every week look at sales pipeline trend data and
make any cost-cutting decisions BEFORE you are forced to do so because of cash constraints. Use the forecast as the lead indicator and act early on the predictions.
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Sales & Marketing Process

Use smart, low-cost marketing to drive sales
It is the strong brands that usually survive recessions and come out the other end stronger and with a bigger market share. Maintaining brand awareness is just as critical to success during a recession than in boom times.

Tip 44 You might be counting the pennies now but
don’t neglect marketing, just spend more smartly! Make sure you keep in the face of prospects with low cost marketing like emails, thought leadership articles, speaking engagements, workshops etc that cost little but have high impact if executed well.

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T I P 45

Sales & Marketing Process

Use your web-site proactively to drive sales
Treat your web-site as your store window! Make sure it is attractive, upto-date and full of valuable information to engage prospects. ALL prospects will look at this prior to deciding on your firm or meeting with you.

Tip 45 Make your web-site a more effective tool in the
sales and marketing process.Write something of value to prospects on your web-site and bring them to the site with a well-targeted email. Make sure the article leads them to the next stage of either a workshop, or a seminar, or a survey, or a meeting – anything that will continue to engage them.

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Intellectual Property (IP)
IP is the knowledge, experience, tools, techniques, case studies, training materials, client lists etc that belong to THE FIRM as opposed to what is in the heads and laptops of individual consultants. Building IP improves competitiveness, reduces delivery costs, increases LEVERAGE, speeds up growth, simplifies training, increases barriers to entry and builds company equity value. Without IP a consulting firm is just the sum of its parts i.e. just very mobile staff and computers! Building IP reduces RISK in a consulting firm.
www.equiteq.com

In a recession it is time to be at your most innovative and build IP fast that will help your clients survive tough times also (BTW, you are looking at some of ours!).

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Intellectual Property (IP)

Develop IP to help clients survive the recession
Encouraging the development of IP is critical to the growth in value of a consulting firm. Without processes to make it happen it will be patchy at best. In a recession we need to focus our innovative talents to survive.

Tip 46 Pull your most innovative staff together to
develop ideas to help clients survive the recession. Focus on your ‘top 5’ clients by size and develop 5 proposals that address the specific survival needs of those clients and for which your services can be used to assist. Make sure there is a short payback period and go and take orders!

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Intellectual Property (IP)

Protect valuable IP in uncertain times
Making sure that all of your IP is stored and maintained centrally and easily accessible to staff is sound management practise as well as good for building value.

Tip 47 It might be difficult to accept but you may have
to let some staff go if times get really tough.They are unlikely to be pleased about this! Do an audit now of all the valuable information that is held by consultants on their laptops and make sure that it is backed up on your central server. Better to be safe than sorry.
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Intellectual Property (IP)

Make your consulting services ‘sticky’!
Good IP makes it difficult for competitors to displace you and makes it easier to win new work. In a recession you will find more competitors willing to drop their prices to take your work away.

Tip 48 Make sure you are difficult to replace. Get your
client teams together and come up with ideas to make your service ‘sticky’.This could be a proprietary piece of project software or a particular methodology unique to you that is embedded in the project or a photo of your client in a compromising situation …OK, just kidding! But be innovative and work out a plan for each client.

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Intellectual Property (IP)

Build new revenue streams from your IP
Some firms have developed IP that with a little effort could be sold as a stand alone product.This could be software or training materials or books, for example.

Tip 49 Take a good look at your business and ask
yourself the question ‘is there stand alone value in any of my methods or processes?’ Even assets like client contact lists have value. Are there other non-competing firms that would value introductions from you to your clients, for a suitable introduction fee of course? Be innovative and you might just find a new revenue stream.

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T I P 50
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Intellectual Property (IP)

Get published

One of the best ways of marketing the services of a consulting firm is to get published in the right places. For this to happen you must have something topical to say that is of value to the audience of the publication.

Tip 50 OK, so what’s topical at the moment? Yes, the
recession! So write an article with one of your better known clients about the effect of the recession on their industry sector.Throw in a few solutions that fit with your services and get it published. Even if it only gets published in the ‘trade’ magazine you can get reprints and mail them to prospects with a covering note. Follow-up….

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T I P 51

Intellectual Property (IP)

Be a case study for an academic / economist
The more you can legitimise your methods and results the more attractive your services will be. Creating links to academics or well-known centres of learning is a good way of doing this.

Tip 51 In a recession many academics make their names
by writing in the popular business press about the reasons for impending doom.This is particularly true of the economists. Academics always need case studies. Find a well-known writer and offer to collaborate on an article about the recession. Use his name and credentials to get the article placed in the popular business or finance press. Make sure you are well-referenced in the article!

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Intellectual Property (IP)

Write up your case studies and send them to prospects
Producing case studies for every piece of client work you do should be mandatory. Sharing these internally is just good practice.

Tip 52 Use whatever ‘bench time’ your consultants
may have in the recession to contribute towards new sales. For those consultants that you wouldn’t want in front of a client in sales mode, get them documenting all those engagements that haven’t yet been turned into case studies. Others can use them to help marketing or sales activities to keep revenue flowing.

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Intellectual Property (IP)

Use the entire firm to drive sales
Regular sharing of methods, client prospects, case study lessons-learnt, new sales propositions etc should be done at least quarterly in all consulting firms.

Tip 53 In a recession don’t stop these sessions as a
cost-cutting measure as that will de-motivate staff and cause unnecessary concerns. Instead focus the topic of the sessions on ideas to drive in new sales from existing and new clients. You might also want to discuss cost control as well and perhaps replace the Bollinger with Asti Spumante for awhile!
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Intellectual Property (IP)

Focus on developing your S&M processes
As a consulting business grows it needs consistency in ways of working through standardised policies, processes and procedures if it is to be successful. Consultants are not good at practising what they preach in this respect!

Tip 54 In a recession take the opportunity to look at
your client management and sales and marketing processes to ensure that they are best practice.This focus and use of potential downtime will benefit you long-term as well as put the spotlight on those processes that might drive some more short-term sales.

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Intellectual Property (IP)

Notes

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Quality of Fee Income
How predictable or risky your fee income from clients is and what you might do about it in the short term is what this lever is about. Strategically this is all about long-term contracts and annuity revenue streams. In the context of a recession it’s about those small, but important moves we can make to de-risk our revenues and reduce the chance of losing the cash you’ve worked so hard for in sales and delivery. One significant bad debt in a recession can take a consulting firm down. It takes about 2-3 months of losses, sometimes less, to bring a consulting firm to it’s knees and don’t expect the banks to help! They are always there in good times but they are as elusive as Bin Laden in a recession.
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Quality of Fee Income

Sell the benefits of your work to current clients
In a growing market we don’t really like to see more than 20-25% of fees with any one client. In a recession it is about making sure our large clients continue to provide us with work.This is the time to invest in the relationship.

Tip 55 Continuously ensure that clients understand
the benefits of your work to them. If not already in place, institute regular ‘top client’ status reviews which focus on costs AND BENEFITS.They will already be looking at cost savings and the only way to stop them viewing you as cost reduction opportunity is to show that financially they will be better off with you IN THE SHORT TERM than without you.

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T I P 56

Quality of Fee Income

Focus on growing existing strategic clients
Is it one large client or a variety of large and medium clients that drives your growth? In a recession it is about risk minimisation and you want the latter.

Tip 56 First make sure that the large clients are happy
(Tip 55) then make sure that you are working with your medium-sized clients to find ways of growing each one. It’s much easier to grow existing clients in any market than it is to grow new, so focus more of your marketing efforts on growing from within existing clients than trying to knock down the doors of new clients.

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Quality of Fee Income

Give your worst clients to the competition!
Have you noticed that it often takes as much effort to get a £10,000 engagement as a £250,000 one? If you look at the main costs in a consulting firm, many of them are driven by 2 cost drivers – number of clients and number of assignments.

Tip 57 Look hard at your pareto of clients and jobs
and start to cull from the small end – many of them will be losing you money and most are not as ‘strategic’ as you think! Challenge hard and move the freed-up sales and delivery resource to larger existing relationships.

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Quality of Fee Income

Link your fees to client benefits/results
We would normally be encouraging you to aim for long-term contracts with your clients but in a recession a different approach is required.

Tip 58 Focus on the hard financial benefits that you deliver
to clients (I know this won’t apply to all of you but get as close to hard, measurable benefits as you can). Start reporting on those benefits in regular client meetings then suggest that you would be prepared to link some of your fees to the achievement of benefits – worst case this could just be project milestones. This will increase the chance of a long-term relationship even though it might appear at first to be more risky.

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Quality of Fee Income

Use the ‘Pipeline Index’ as your ‘litmus test’
It goes without saying that a long order book is desirable in any market conditions. In a recession it is crucial to know what the order book is at any point in time as compared with your on-board delivery capacity.

Tip 59 Put in place a new measure that links the two
together.We call it the ‘Pipeline Index’ and when times are tough it becomes a key measure to ensure that sales translate into profit and cash. Calculate your delivery capacity at full sales value and divide it into your discounted sales pipeline to create a ratio. Bigger is better! Use it to make sales and recruitment/layoff decisions.

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Quality of Fee Income

Link PM bonus to client cash collection
Nothing freaks an investor or bank more than the inability of firms to collect cash from clients – it smacks of poor management and lack of control. If your debtor days are more than 30-45 and very variable, here’s how to fix it.

Tip 60 Make it the responsibility of the Project Manager
on the engagement and link the achievement of this to his/her bonus.You can be as hard or as weak on this as your personality allows eg NO bonus if debtor-days exceed 45 or make it one factor in a balanced scorecard. In a recession tougher is best!!

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Quality of Fee Income

Get tough on client debts
Most of the time I’m sure your clients pay their debts to you but occasionally you find a client who just doesn’t want to pay. In a recession it happens more often so if it happens to you…

Tip 61 Go to www.thomashiggins.com (if in the UK, or
look up similar service providers in your country) and pay £2 to launch a legal suit. It threatens to close the firm if the debt is not repaid! It is run by lawyers, is totally legitimate and works. Most companies pay up in total within 3 months and it will cost you just £2. It works for the lawyers because they have automated the process and the 5% or so that don’t pay up cost you a % of the amount to collect. Great business!

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Quality of Fee Income

Notes

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Client Relationships
Without clients there are no fees and no future! This lever is about who our clients are or should be and how we keep, nurture and grow them once they become clients. Long-term, growing, client relationships are the hallmark of world-class consulting firms. Not all clients are worthy of our service! – we should choose the clients we wish to serve.This is particularly true in a recession when there is a tendency to accept work from clients who pay poorly and in some cases not at all. This is the time to invest in client relationships through management and sales focus and smart, low-cost marketing.
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Client Relationships

Share risk with strategic clients
As a general rule, large blue-chip clients are easier to work with, pay better feerates and require larger engagements, all of which are better for profits and shareholder value. In a recession there is a tendency to take work from smaller clients that you wouldn’t normally entertain as larger ones start to spend less. DON’T DO THIS!

Tip 62 Focus your attention instead on making sure
you stay with your strategic clients by sharing the risks of the economic downturn.Take the initiative and offer reduced or contingent fees for a fixed period and the work will most likely continue.

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T I P 63

Client Relationships

Get CEO/Board sponsorship for your work
Who do you normally sell to in your client, the Board or junior management? If it’s the latter you are much more exposed to being a casualty of the recession than if your sponsor is the CEO or one of his/her colleagues. It’s likely that your sponsor, whoever they are, doesn’t want your work to stop.

Tip 63 Use your current sponsor to network to the top
and gain Board visibility and support. Focus on how your work is helping your client weather the recession – be innovative if you have to! Get a meeting, impress the boss and increase your chances of staying there through tough times.
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Client Relationships

Maintain long-term client relationships
Long-term client relationships are the surrogate for the value implied by a large order book that most consulting firms don’t possess.They are crucial for building equity value. In a recession these are the clients you must keep happy and maintain the relationships.

Tip 64 List your clients by the length of the relationship
and focus your client relationship and marketing skills on keeping those closest to the top of the list.This might mean taking less margin or even doing some work for free.This will pay-off in even more work after the recession and in long-term equity value.

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T I P 65

Client Relationships

Build project benefits into your client budgets
Making your way into the budget of your clients as a specific line item is a smart thing to do under normal economic circumstances. In a recession though it can be a double-edged sword as budgets come under scrutiny and you don’t want to be removed by the stroke of a planner’s pen!

Tip 65 Make sure the benefit side of your costs are
also included in the budget.Talk to your sponsor about adding benefit statements to the budget so that at least it will be obvious that both costs and benefits will disappear if they contemplate putting a line through your project budget. It might just make them think twice!
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Client Relationships

Build your advocate network in current clients
Most consulting firms know that they should have formal account plans for their strategic clients but many pay lip service to the activity. In a recession it will take all of the firm’s relationship management skills to ensure that your work doesn’t get cancelled or postponed due to budget cuts.

Tip 66 ACT NOW! Pre-empt potential cuts by
proactively putting an account plan together that minimises the chances of being a casualty of the recession. Focus on building more advocates in the client at more senior levels and emphasizing the short-term benefits and ROI of your work.

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T I P 67

Client Relationships

‘Walk the corridors’ of your best clients
Strategic clients should have account managers assigned to the client who have the long-term growth prospects of the client in mind as opposed to the current live project. During a recession it’s time for them to live on the client site!

Tip 67 Walk the corridors of the client, keep your ears
open and reinforce the benefits of your work to all who will listen.This will be a crucial part of making sure you are a valued part of the client’s plan to survive the recession also. Investing this time now will pay dividends both during and after the recession.

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Client Relationships

Offer personal help to your client sponsor
We all know that we should ask the client regularly and formally if we are meeting or exceeding their expectations but how many of us take the time to do it?

Tip 68 If it’s not already part of your process, now’s the
time for you as owner of the business to get out to clients and proactively meet the most senior sponsor of your work to see if they are happy with progress and results.Take the opportunity to talk about the economy and ask if there is any more you can do to help them in these difficult economic circumstances. Become part of the solution to the recession in their mind, not part of the problem!

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T I P 69

Client Relationships

Go East, Young man!
The entire world is not in recession, just parts of it.The middle-east, for example, is growing at record rates. Normally we wouldn’t recommend expanding internationally unless your local business has reached scale and is growing but here’s a tip that will work in a recession.

Tip 69 Talk to existing clients about their international
operations or business contacts they have in regions that are not in recession. Get them to make an introduction and use your existing client successes as the case study to gain access.
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And if things get really bad!
‘Really bad’ means that it was too late for some of the previous measures – or you ignored them! - and the business is running out of cash.You might be 3 months or less from going bust. Remember the old saying “Revenue is vanity, profit is sanity and cash is King”. Well it’s time to focus on cash to be able to survive to tell the tale and that’s what Tips 70 to 100 are about. Tips 91 to 100 are only for the bravest among you who have absolute confidence in the future of your business. If this isn’t you, then ‘shutting the doors’ might be the better option! So assuming you want to survive, here’s what to do…

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Tips to avoid going bust!
Management Tips

Tip 70 Don’t panic, avoid rash decisions. But do take
action, it won’t go away.Think first then act quickly.

Tip 71 Don’t advertise your difficulties to either staff or
clients. Keep the issues within the management team or you will cause panic.

Tip 72 Remember businesses only fail for one reason.
They run out of cash so try and prevent this.

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Tips to avoid going bust!
Management Tips

Tip 73 Put cash flow and financing on the agenda of every
management meeting. Keep it ‘front-of-mind’.

Tip 74 Share the problem with your management team.
Don’t take on the load personally, it’s not good for your health!

Tip 75 Develop a survival plan with your management
team. Plan for a successful outcome, don’t leave it to chance.

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Tips to avoid going bust!
Bank Tips

Tip 76 See your bank manager as early as possible. Banks
don’t like surprises so keep them informed of your plans.

Tip 77 Monitor trends in your cash position at the bank
daily.The bank will be doing this anyway so inform them in advance if you need help.

Tip 78 Monitor daily any bank covenants you may have.
Tell the bank in advance if you expect to breach them.

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Tips to avoid going bust!
Bank Tips

Tip 79 Renegotiate your leases, your credit terms and
other debts. Credit is the same as cash – don’t forget that!

Tip 80 Consider invoice discounting. Best done before
a crisis but can help if you have blue-chip clients.

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Tips to avoid going bust!
Debtors / WIP / Creditors Tips

Tip 81 Pay your suppliers at the maximum time your
terms will allow.Talk to suppliers and explain the situation.

Tip 82 Stay on top of cash collection from clients.
Get project managers to make friends with the accounts departments.

Tip 83 Change your payment terms with contractors.
Pay them when you get paid and let them share the load also.

Tip 84 Invoice new clients at the start of the project.
It’s amazing how many clients will accept this policy.

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Tips to avoid going bust!
Debtors / WIP / Creditors Tips

Tip 85 Reduce your payment terms with clients. 10 days
from date of invoice is possible if managed well.

Tip 86 Negotiate a discount for block-payment.This works
particularly well with public sector clients at year-end.

Tip 87 Accelerate WIP on current projects.Where possible
collapse project lead times by adding resources.

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Tips to avoid going bust!
Spend Reduction Tips

Tip 88 Review the accounts and stop any non-critical
spend. Be careful of the message sent to staff.

Tip 89 Tackle any staff redundancies. Make sure it is the
‘right’ staff that go and don’t forget redundancy costs.

Tip 90 Outsource any admin costs. Look at reducing
service levels as well until after the crisis.

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And if all else fails
Raising finance

Tip 91 Stop paying yourself and co-directors.
You may be able to survive personally better than the firm.

Tip 92 Sell the Ferrari (!) to raise cash. Second or third
cars are a luxury when survival is at stake.

Tip 93 Re-mortgage your house to raise capital.
You can always pay it back when times are good.

Tip 94 Ask family and friends to invest in you.
If you are confident, it could be a wise investment.
www.equiteq.com

Tip 95 Explore all other lines of credit open to you,
including credit cards.
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And if all else fails
Staying sane!

Tip 96 If cash is OK today and you apply a good number
of Tips 1-69 you will prosper during the recession and take market share.

Tip 97 Remember pride has no place when survival
is at stake. Swallow fast and take decisive action.

Tip 98 Don’t neglect your family whilst coping with
the problems.You will need each other to survive.

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And if all else fails
Staying sane!

Tip 99 If it happens there is no shame in bankruptcy.
You will survive to fight another day and be stronger for the experience.

Tip 100 Your business isn’t worth sacrificing your health.
Keep it all in perspective and chill-out!

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About Equiteq
Equiteq LLP provides merger, acquisition and growth advisory services exclusively to the business consulting and IT services industries. We help business leaders in the following areas: • Company Performance Benchmarking and Valuation • Profit and Equity Growth Development • Exit Strategy and Company Disposal • Acquisition Services for Buyers • M&A Research Services To find out more go to www.equiteq.com
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Where are the profit risks in your firm?
How well does your firm meet best practice in the 8 levers of equity value used in this book?

If you would like to benchmark the risks and profit opportunities in your business and build a plan for growth, go to www.equiteq.com/ega
© Copyright Equiteq LLP 2008

Equiteq LLP 71 Castle Street, Farnham, Surrey, GU9 7LR, United Kingdom T: +44 (0)1252 724264 info@equiteq.com www.equiteq.com
Equiteq is registered in England and Wales as a Limited Liability Partnership, No. OC324309


				
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